Jack Carter Trading

Hey traders,

Last week, I walked you through the importance of selling options and letting time decay work in your favor.

But here’s the thing: Even when you’re selling options, you can’t just pick any stock out there. You need to be smart about which stocks you trade on if you want to stack up those consistent wins week after week.

So today, I want to go over a few simple rules I use to filter down the list and find solid stocks that are worth trading.

These rules keep me out of trouble and make sure I’m not wasting my time on stocks that have no business in my portfolio.

The 5 Rules I Use to Pick the Right Stocks

Before you pick a stock to trade, you’ve got to filter it down to make sure it’s solid. Here are my five rules for doing that:

The Stock Must Trade on a Major Exchange
This is non-negotiable. Only look at stocks trading on the NYSE, NASDAQ, or AMEX. No OTC (over-the-counter) stocks. Why? Because OTC stocks lack the liquidity and transparency you need to trade options safely.
No Penny Stocks or Crypto-Related Stocks
You know the type — the ones you see hyped up all over social media. Avoid them like the plague. They’re way too volatile, and while that might sound good for selling options, they’re also prone to massive swings that can wipe you out. Stick to companies with solid foundations.
The Stock Must Be $15 to $25 or Higher
This rule is crucial. I want the stock to be at least $15 to $25 per share. Anything less, and you’re dealing with companies that haven’t proven their worth. Higher-priced stocks tend to be more stable and attract institutional traders — the big players who keep things moving smoothly.
Must Trade 500,000 Shares Average Daily Volume
Liquidity is king when you’re selling options. I want stocks that have a daily trading volume of at least 500,000 shares. Why? Because higher volume means tighter spreads and better fills for your trades. It also means you can get in and out of positions without getting stuck.
The Stock Must Be in a Really Nice 6-Month Trend
This one’s key. I want to see a solid trend over at least six months. Not just a blip on the radar, but a consistent uptrend or downtrend that shows me the stock is moving with purpose. If you’re not sure how to spot a trend, I’ve got a detailed piece I wrote on spotting trends you can check out.

How to Find These Stocks

I use my custom TrendPoint software to scan the market and find stocks that meet these criteria.

But you can still do this using free tools like this Finviz scanner or even your broker’s platform. Just plug in the rules I’ve shared, and you’ll have a solid list of potential stocks to trade.

The Bottom Line

Remember, trading is all about stacking the odds in your favor.

Following these rules is how I make sure I’m only selling options on stocks that give me the best chance of winning.

So, before you dive into your next trade, make sure the stock checks all these boxes. Trust me, it’ll save you a lot of headaches in the long run.

Trade well,

Jack Carter

P.S. Speaking of picking the right stocks… The Fed meeting is this week… and that’s bound to create a lot of volatility. Before you trade a single stock, take a look at these 10 tickers I’m watching like a hawk!

Are you ready for the volatility this week’s Fed rate announcement is going to bring to markets? Some folks are expecting a big 50 basis point cut while others think the Fed will go with a more moderate 25 basis point cut. But the possibility of a wild card — a 75 point cut or no cut at all, could still rattle markets.

Before you trade a single stock, you need to get this list of 10 stocks I’ll be watching after the announcement!

Now for our top trending stocks of the week:

To help you discover the power of trends, every week, every week, I share with you a handful of the top trending stocks.

These stocks are picked by the custom-built TrendPoint software I designed to pick the strongest trending stocks in the market right now.

If you know anything about me, you know that every trade I get into starts with a trending stock.

Unless a stock is in a strong trend, I don’t want to hear about it. In my book, wishy washy stocks are the quickest way to losing money.

This Week’s Stocks

All 3 major indexes have bounced over the the past week. But the recovery has been far from even.

The SPY is almost back to all time highs and the Dow just made a new all time high today… Meanwhile, the tech-heavy Nasdaq is over 6% the all time high it hit back in July.

So what do we do when markets aren’t giving us a strong signal across the board? We look for individual stocks that are trending more strongly than the broad market.

Like these 3 hand-picked beauties I have for you today:

AVB
BK
EBAY

And don’t forget about our previous list, which you can find here.

This week’s stocks show a strong trend and could still be in play for the next few weeks.

What can you do with these stocks?

Well, there are a couple of things you could consider — after doing your own research, of course:

You could just buy the stock. This is probably the simplest thing you could do. Then just wait for it to go up and sell when you hit a profit target you’re comfortable with. This is only for stocks we’re long on. For stocks we’re short on, you can short them.
You could buy an option. You know I’m not a fan of speculative plays, but every once in a while it doesn’t hurt to throw a little cash at a speculative option. Of course, while options can move bigtime if the stock goes up… the downside of options is that you have a time limit on how quickly you need the stock to make that move. So think about your risk tolerance and consider buying calls or puts depending on the stock recommendations above.
You could do an income play. If you’ve been following me for any length of time, you know that I’m a big fan of income plays, because they increase your odds of winning. We do this by SELLING options instead of buying them. If you haven’t tried your hand at income trading yet, I urge you to try this exercise for yourself.

Without risking any money, it will really let you see the power of income trading and why it’s my favorite method.

Whether you end up doing naked puts, covered calls or some kind of spread (like this bull put spread example), income plays like these are really my preferred method to use when I’ve found a great trending stock like the ones on this week’s list.

Because even if the trend comes to an end, you don’t have to be exactly right. With a direction play like buying a call, you have to be exactly right. But an income play gives you a lot more “leeway”, where the stock can move against you and you still have room to breathe and win the trade.

That’s it for now.

Stay tuned, because I’ll be sending you a new list of TrendPoint Best Trending Stocks every week! (usually Mondays)